Inside Cuban Cigars—A Talk With Cubatabaco Head Francisco Padron

Francisco Padron, the director of Cubatabaco, Cuba's cigar export sales group, didn't get much good news in 1993. A March storm severely damaged the tobacco crop and the cloth tarps used to grow shade wrappers. In combination with other factors, Padron was forced to cut back sharply on Cuba's cigar exports.

Cigar Aficionado Editor and Publisher Marvin R. Shanken interviewed Padron in Mexico City in early December. They discussed the current state of the Cuban cigar industry and what the future holds for the country's cigar exports.

Cigar Aficionado: There has been a lot of talk that [the 1993] hurricane severely damaged Cuba's tobacco crops, and that this has affected quality and quantity, particularly for wrappers. What is the situation for production of Havana handmade cigars for export? What can we look forward to in the next few years?

Francisco Padron: The hurricane caused a great deal of damage. We lost about 60 percent of our crop. It was only a quantity problem, however. The quality was very good, very good. It is a pity that in this past year we have been having very good quality crops, but the quantity has not been good. We are not delivering enough cigars to the world market because of this.

C.A.: But the word was that the large leaf wrapper crop was annihilated, and that this was going to adversely affect the production of large-sized cigars--the double coronas, Churchills and so forth?Padron: If you have a big crop, you deliver more large leaves and you have more room to produce more large cigars and to choose the best leaves. When you have a small crop, it's the inverse. Wrappers are a very delicate thing. So when the hurricane came, it hurt the wrapper crop. It hurt all of the crop, but particularly the wrapper crop.

But even with that problem, we produced [in 1993] about 200 million cigars for the domestic market. But we are not delivering anything to the export market that does not have the right quality because quality is the first thing above all for us.

C.A.: In 1993, what were the total exports for Cuban cigars?Padron: About 57 million cigars in 1993.

C.A.: What did you export in 1992?Padron: 67 million.

C.A.: And in 1991?Padron: 77 million.

C.A.: And 1990?Padron: More or less the same quantity, about 80 million.

C.A.: With the hurricane damage, what do you forecast your exports to be in 1994?Padron: Let's first discuss how we are going to increase our production. Worse than the hurricane is the embargo, the double embargo. Right now, it's almost like there's an embargo from the other socialist countries. We used to buy from them, fertilizers and plenty of other things for our crops. What is hurting us the most is that we can't buy right now, nor have we bought from the eastern socialist countries during the past three years what we used to buy from them for the cigar crop.

C.A.: What are some of these things?Padron: Fertilizers and plenty of other things. For example, all the covers or tents used for growing wrapper leaves came from the Soviet Union. And now we can't get them. We used to buy 20 million square meters. Oil, gasoline and diesel. That is very short, and this really hurts the crop.

C.A.: What do you do if you don't have the tenting for the wrap-per crop?Padron: We reduce the crop. It is as simple as that. You can reuse about 30 percent of the old tents, but the storm [in 1993] destroyed all of the tents.

C.A.: That means those losses will affect future harvests?Padron: We think that this coming crop will be a little better, and those afterward should be very big ones. For the '94 crop and on, we have solved almost all of our problems, almost everything.

C.A.: So a year from now you should be back to the '90 and '91 levels?Padron: Even bigger.

C.A.: What is your target for 1995?Padron: We think that in 1995, we should export 70 million cigars, and in 1996, we should have 80 million to 90 million.

C.A.: But what do you forecast for 1994?Padron: There will be no more than 50 million cigars.

C.A.: No more? Some people say much less.Padron: No. No. That is more or less what we are going to do. Remember this. We never, never export cigars unless they are of the right quality. Of course, you may not believe that we can choose or that we wouldn't take a lesser-quality wrapper from the domestic market production and use it for export. But that is not the case. We have to be careful, very careful. Besides, you know what decides the cigar is the shortest crop because we mix three crops. And if you have two short crops in a row, you have problems. So, we have been taking more tobacco from our warehouses.

C.A.: Another comment is that because of the difficult economic situation in Cuba, you don't age the cigars in warehouses as long as you used to because of the shortages in supply and the need for dollars.Padron: That is not true for cigars. I have instructions directly from Fidel. He has said that I mustn't deliver cigars that are not the best quality. He says that they represent the image of the best quality of Cuba. So we never do anything else but deliver the best quality.

C.A.: In the numbers that you have given me for 1990 to 1995, what percentage is handmade versus machine made?Padron: Now we only have about 10 million or 15 million machine-made cigars. That's it.

C.A.: So that's pretty steady. You are not looking to increase or decrease the machine made?Padron: That depends on the orders. This is a business. If anybody asks for the cheaper machine-made cigars, we are going to deliver. Our priority, however, is handmade, not machine-made cigars.

C.A.: You are delivering in the area of 50 or 60 million cigars, and let's say 40 to 45 million are handmade. With the increasing demand for Cuban cigars, do you have any idea what the total world demand would be for handmade Cuban cigars?Padron: Without the United States, we estimate the market to be from 90 to 100 million cigars.

C.A.: And with the United States?Padron: 20 million more and increasing in four years.

C.A.: At the Cigar Aficionado seminar we held in New York, a panel discussed Cuba. It included Edgar Cullman, Nick Freeman, Theo Folz--top people in the cigar trade. We asked them about the embargo: how long did they think it would continue, given the current political environment and the leadership of Clinton. They seemed to have a consensus feeling that the lifting of the embargo was another five to seven years away. They added that in order to revitalize Cuba's cigar production it would take another five years. So, it would be 10 or 12 years before there is any balance of supply and demand, if the United States could buy Havana cigars. What would your response be to that?Padron: I am not a politician. Things are moving. As Jose Martí [the legendary, 19th-century, Cuban political hero] said, "the most important thing in politics is what you don't see."

C.A.: A lot of people--cigar lovers--are disappointed that there has been no significant movement to bring things together between the two countries and that President Clinton has maintained the policy and given support to the Cuban-American Foundation of (Jorge) Mas Canosa. Do you see anything happening from the Cuban side that might lead to an end to the embargo, or is it really up to when the United States decides that it's enough already?Padron: It is like a fight between Goliath and David. And you don't know who must make the first move.

C.A.: If the embargo ended tomorrow or two or five years from now, have you thought through how it would happen and what the scenario would be? You would have problems with certain brands as far as trademark issues, and with other brands you do not have a problem. Have you thought how you would introduce your brands to the American market?Padron: First, there is going to be a fight. We have not been able to have the brand name in the United States because of the embargo. It was forced by you [the United States]. It was not decided by our side. Your side decided on this. So, maybe there is going to be a fight. But we are not going to fight in order to get our cigars into the United States. As we always say, a Habano [cigar] is a Habano [cigar]. With a name of Marvin or Padron or Meyer or whatever goes on the cigar, it is a Habano. So, we are going to let everybody know that we are here, and this is a Habano. We are not going to fight with somebody else because he owns the brand name of Cohiba or Montecristo in America. We have been living without that for a long time.

C.A.: So if you cannot resolve the issue, you would introduce new brand names which are Habano, and there would not be a conflict unless the government said that this issue must be resolved. You know the issue is that the families who lost the brand names say that they are entitled to have those brand names back, which is more confusing because of certain problems in the international market such as what has happened with Spain's tobacco monopoly, Tabacalera. Could you explain briefly what is the situation there as far as Montecristo, H. Upmann, Partagas and other brands?Padron: In general, we have solved our disagreement in a way so that it will not hurt or create any problems for Tabacalera. This will help us to keep delivering Montecristo, Upmann, Partagas and others to the Spanish market.

C.A.: So you are continuing to supply Spain, but who owns the brand names now? I thought that the worldwide rights, except for a few countries such as the United States, Cuba, the Dominican Republic and others, were sold to Tabacalera by Consolidated and General Cigar?Padron: Tabacalera owns the names. But they do not own the name in all countries. We own them in plenty of other key countries in the world.

C.A.: In what countries do you still own the brand name Montecristo,as an example, since it is your biggest brand?Padron: We own it in the United Kingdom, Germany, Holland, Belgium, Switzerland, Canada and plenty of other countries.

C.A.: In what important countries does Tabacalera own the brand?Padron: France and Spain are the most important. They are our two biggest markets.

C.A.: So you are supplying the brand to them, and you have worked it out to continue the flow. What about the situation with the French tobacco monopoly, Seita? There was a lawsuit regarding Montecristo and Partagas....Padron: We are still in the courts.

C.A.: But I thought that you lost one of the lawsuits?Padron: Yes, but we are now in the upper courts.

C.A.: Have they decided what you have to pay in damages? I heard more than $10 million....Padron: No. No. They are asking for the sky. The stars. Everything.

C.A.: What are they asking?Padron: I don't remember exactly. I don't want to even think about it.

C.A.: What is the lawsuit about? Who owns the name?Padron: They want to get money for the use of Montecristo and Partagas since we introduced those brand names in France. This is an incredible thing because I can show you the figures. Montecristo and Partagas were nothing in the '60s and early '70s. We made the reputation of Montecristo and Partagas.

C.A.: As I remember, Montecristo was introduced into the French market around 1973, which is when it took off there?Padron: Yes. Yes. We created the brand name, not them.

Let me tell you something. Because we lost that fight in the courts in France, and we are now in the higher courts on appeal, we took Montecristo, Partagas, Ramon Allones, La Gloria Cubana, Por Larrañaga and four others off the market.

C.A.: You took those off the market in France?Padron: Yes. Yes. So, as for our strategy for France, given the shortage in brands there, we decided to put there whatever they ask for in the other brands. Let's see what will happen in that market.

C.A.: What did you put in those markets?Padron: No. No. We just decided to increase the supply of the brands left in the market. What happened is that we are selling more cigars than the year before. It was incredible. This is not just a story, here are the figures. For example, El Rey del Mundo was up 200 percent. Hoyo de Monterrey was increased 200 percent. All our other brands in the French market have had tremendous increases. People who know how to smoke cigars are not going to smoke something else if they can find another Havana cigar.

So, I am very quiet. I took a chance in my second market, and it was all a success. I am not worried about the brand name. This is a different thing. When we started on this new direction in France, I forecasted that it would take us two years to get back our sales figures there, but to my surprise it happened on the very first year. And now we are selling more than the year before.

C.A.: Did you have a similar experience in Spain?Padron: We didn't have time to find out. Do you know what has happened in Spain with the damn problem? The former president of Tabacalera thought that the most important thing for Montecristo was the name of the brand. So, they thought that we would never withdraw the brand from their market, but when the contract was up, I withdrew the Montecristo. It was a terrible political problem. Everybody all over Spain was writing about how crazy this was. So they realized the importance of Montecristo and Habano.

C.A.: So you withdrew the brand from the market?Padron: Yes.

C.A.: Is it back now?Padron: Yes. It was back for Christmas.

C.A.: When did you withdraw it?Padron: Last April, more or less.

C.A.: So they had no Montecristos after that?Padron: They had a little bit of stock left, but after that they didn't have any more. It was a terrible problem for them. So, they called us, and they signed a special contract for us to deliver.

C.A.: The reason why Montecristo and Partagas are not in France is because of the lawsuit?Padron: No. We are putting Montecristo and Partagas back in the French market right now. Right now.

C.A.: Is mini-Montecristo coming back to France?Padron: They are coming back to France from Spain.

C.A.: But what will Seita, the French monopoly, do? They have a large factory that isn't being used to make the mini-Montecristo anymore?Padron: We have made a new agreement for SEITA to make a new Cohiba, a mini-Cohiba.

C.A.: When is that coming?Padron: That will be soon. We are testing it now.

C.A.: What is the largest export market for handmade Cuban cigars today?Padron: Spain.

C.A.: No. 2?Padron: France

C.A.: No. 3?Padron: United Kingdom.

C.A.: No. 4?Padron: Switzerland.

C.A.: No. 5?Padron: Middle East as a whole.

C.A.: No. 6?Padron: In that range, there are plenty of other countries. Canada. Mexico. Brazil. There are plenty in that range. One million; 1.5 million, 2 million cigars. There are plenty.

C.A.: In terms of brand priority, is Cohiba viewed as your No. 1 priority in the world today?Padron: No. It is the most expensive one. But the flagship is Montecristo.

C.A.: What percent of your total handmade cigars today is Montecristo?Padron: We don't make machine-made Montecristos. About 45 percent of our sales of handmade cigars are Montecristos.

C.A.: What would be the No. 2 brand?Padron: Partagas.

C.A.: What about No. 3?Padron: There are plenty of brands at that level.

C.A.: So Montecristo may be 20 or 25 million cigars? And Partagas would be 8 or 9 million?Padron: Then comes plenty of others such as Romeo y Julieta, Punch, Bolivar, Hoyo de Monterrey....

C.A.: And those would be 3 million or 4 million cigars each?Padron: More or less in this range.

C.A.: But Cohiba is in the range more or less?Padron: No. You have less than that now.

C.A.: I thought it was 4 million cigars for Cohiba?Padron: No. No. That would be with a wonderful crop...two wonderful crops in a row.

C.A.: So the 4 million cigars we have heard is really the limit when everything is working properly?Padron: Yes. Yes.

C.A.: In this past year, what was the total production of Cohiba?Padron: Half that. Two million, or a little more.

C.A.: But the Siglo series 1 through 5 was 1 million: 200,000 per new cigar?Padron: That was the original plan.

C.A.: But what was produced?Padron: I launched the new Siglo range because I promised that I would do this, but I have already sold what we produced. It is an incredible thing.

C.A.: But give me some idea what you sold of Siglo, half a million, a quarter of a million?Padron: We did more or less half of what we planned, about a half million.

C.A.: So you only did about 4,000 boxes of each size. When will you have some more Siglo cigars to send people?Padron: We should have some Siglos available during the first quarter of 1994.

C.A.: Is the production for 1994 of the five sizes of Siglo going to be a half a million or more?Padron: More or less a half million.

C.A.: So what you are saying is that if you take away the half million of the Siglo series, then the rest of the Cohiba range is about 1.5 million cigars?Padron: Yes. More or less.

C.A.: That's terrible.Padron: No. No more.

C.A.: Production has really gone down.Padron: Cohiba should be at about 2.5 to 3 million cigars a year in the right situation. Remember this. Don't tie Cohiba to the rest of the crop because we select the tobacco from very few farms. Maybe there is a disaster in most places, but maybe in one of those small places the crop was wonderful. We take care of those special places.

C.A.: So when you have limited resources for the tobacco crop, you prioritize them to go to these top-quality farms first?Padron: Yes. We try to maintain Cohiba first.

C.A.: What do you recommend that consumers buy now considering the difficulty in supply of such fine cigars as Cohiba Siglo, Hoyo de Mon-terrey Double Corona and others?Padron: It depends what you like.

C.A.: That's not what I mean. For instance, we have given a great score to the Hoyo de Monterrey Double Corona (99 points), but nobody seems to have it. Are you increasing the production of the Hoyo Double Corona?Padron: For all the fifth- and sixth-category cigars [the highest level in craftsmanship in Havana cigars], there is a definite problem because we did not have a good crop of big wrapper leaves.

C.A.: Could you tell me the approximate production of the Hoyo de Monterrey Double Corona?Padron: I don't have the figure in my head. It was more or less the same production as last year.

C.A.: That one size: is it 50,000 or 20,0000? What is it?Padron: Really, I don't have those figures in my head.

C.A.: Let's go to another subject. Davidoff.Padron: That is history.

C.A.: I understand it's history, but the people at Davidoff have said to us in the past that if the situation changes they would like to come back to Cuba....Padron: Forget about it. As long as I am in Cubatabaco, forget about it. That is history. We don't need Davidoff. Life has proved that we don't need that name. And that's the most important thing.

C.A.: So they have to hope that you will go so that they have a chance to deal with somebody else.Padron: Maybe if the next person in my position is a fool; maybe they will have a chance. Why do we need Davidoff? What for? They killed their own chances!

C.A.: We did a story a year ago about the Trinidad cigar, Castro's personal cigar for gifts. This has started a great mystique. Everybody wants to see it. Everybody wants to hold it. Everybody wants to smoke it. Is there any possibility, on a limited basis, that you might take the Trinidad out of just being a private stock for Fidel and diplomatic friends?Padron: I don't think so because he is going to tell us, "fellows, why don't you create your own brand? Whenever I come up with a brand name, you take it from me." He already told me that I should pay him a royalty for the Cohibas I sell (laughs). He is right, you know.

C.A.: Does Castro stay in touch with what is happening in the world market for Havana cigars, and how the demand and image are growing, and how they are a great asset in terms of image to his country?Padron: I have already told you the instructions he has delivered to me. He said, "Padron. Quality first. Quality first." He says that if we have a short crop, then we must have a short production of exportable cigars. It's quality first.

C.A.: Is there any product from Cuba that is exported that has the importance in terms of top image like Havana cigars?Padron: I think that our lobsters and our shrimps have a very high image. Of course, our rum is also very well known. Also, our coffee is excellent.

C.A.: A week ago in London, there was an auction to help raise money for medical relief in Cuba at which time boxes of pre-Castro cigars and others went for very high prices. There was one box of 50 Cohiba Lancero cigars that had Fidel Castro's signature on top. That sold for a record £12,500, or about $18,750 (The money was raised for Cuban medical relief). Does Castro know about this, and what was his reaction?Padron: He was surprised. He laughed and said, "well, if you need any more boxes to be signed, just let me know." He was just joking, but he was very, very proud.

C.A.: So you might do this again?Padron: That depends on him.

C.A.: How did you get him to sign the box in the first place?Padron: He decided to do it. That was up to him.

C.A.: Someone had to ask him?Padron: I didn't do it. I am not sure how it happened.

C.A.: Has Cubatabaco ever held back stocks of cigars, and, if so, do you have any stocks of Cuban cigars from before the Revolution?Padron: We have a few stocks of these cigars (from 1959 and older). Not many. Just a few. We always keep some of them in stock.

C.A.: They are not for sale?Padron: No, they are not for sale.

C.A.: Have you thought about producing vintage-style cigars where you note when they were produced or from which harvests?Padron: No. What we are going to do from [1994] on is that we are going to make tastings of next year's production all over the world. For example, in Spain we are going to make a tasting of the Montecristo for the relaunch of the brand there. We are deciding what we are going to do exactly at the moment. We might launch a Romeo y Julieta in England and Montecristo in Spain and so on. We are deciding on the size.

C.A.: Would it be marked on the box?Padron: No. I don't think so. As you know, you can have the same blend every year. It is always a little different, but you try to keep it almost the same.

C.A.: Are there any new brands you plan to bring out with in the near future?Padron: We were really ready to come out with a new brand, but then we had this agreement with Tabacalera.

C.A.: What were the names of the brands?Padron: I am not going to tell you.

C.A.: Are there any new sizes of existing brands coming out?Padron: No.